The Midlands and the North West of England saw the UK’s strongest house price growth over the last year, new figures suggest.

Manchester returned the highest annual growth of 7.4 per cent, followed by Liverpool (7.2 per cent), Birmingham (6.8 per cent) and Leicester (6.5 per cent) in the 12 months to June 2018, according to Hometrack's UK Cities House Price Index.

By contrast, London prices were only up a marginal 0.7 per cent, while Southampton was 2.1 per cent, Oxford (1.9 per cent) and Belfast (1.4 per cent).

Northern powerhouses: Manchester returned the highest annual growth of 7.4%, followed by Liverpool (7.2%), Birmingham (6.8%) and Leicester (6.5%) in the 12 months to June 2018

Cambridge was down 0.2 per cent and Aberdeen (2.8 per cent) too.

Overall, UK house prices increased an annual 4.6 per cent, and 4.4 per cent for the first half of this year.

On a quarterly basis, prices in the capital reversed six months of decline, rising 1.8 per cent in the three months to June.

That trend is supported by the fact that 61 per cent of London postcodes are registering month-on-month price rises.

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This modest improvement in market conditions reflects greater realism by sellers in the wake of a two-year re-pricing process.

The discounts sellers must give buyers to achieve a sale has also started to narrow across London, reversing a two-year upward trend where the discount grew from one per cent in the second quarter of 2016 to five per cent during this year’s first quarter.

Manchester also posted the lowest level of discounting from the asking price to achieve a sale (2.2 per cent), where market conditions have remained strong for the last two years. Discounts have fallen in Liverpool, where prices are rising off a low base, but remain above average at 4.8 per cent.

Capital returns: London's price growth increased 0.7% y-o-y, while prices in the capital reversed six months of decline, rising 1.8% in the three months to June

Hometrack’s insight director said: ‘The UK market is operating at two-speeds at the moment, with growth in regional cities in the Midlands and North West far outstripping those in the South.

‘However, affordability pressures in the South East in particular are having a slowing effect on house prices as borrowers are priced out of the market.’

He added: ‘After two years of falling sales volumes and rising discounts to achieve a sale there are some signs of life returning to the London housing market.

Low discount: Manchester also posted the lowest level of discounting from the asking price to achieve a sale (2.2%), where market conditions have remained strong for the last two years

‘Discounts are finally starting to narrow as sellers become more realistic over pricing.’

‘While prices in London have picked up over the last quarter, we expect the annual rate of growth to remain weak for the foreseeable future.

‘The positive news is that greater realism on the past of sellers will support transactions, which have fallen by 20 per cent since 2014.’

London rates: The lowest discounting in London was in outer city and commuter areas